#### The Gemco Engineering & Mfg. Co., Inc., Appellee, *v.*Henderson, Appellant, et al.

(No. 31324

Decided March 2, 1949.)

*99*Messrs. Wood, Arey, Herron <& Evans*and *Messrs. Taft, Stettinius & Hollister,*for appellee.

*Messrs. Long & Bloom*and *Mr. J. Warren Kinney, Jr.,*for appellant.

*100Hart, J.

This court is in agreement with the Court of Appeals in finding, under the evidence, that Henderson was not employed by Gemco to invent, and that he is the owner of the inventions of both the mounter and demounter, subject to any assignment or assignments thereof which Henderson may have theretofore made. In fact, counsel for Gemco now apparently concede that such finding is warranted by the evidence.

However, Henderson maintains that the Court of Appeals erred in that part of its decree, which gave Gemco a nonexclusive shop right to use, manufacture and sell both inventions. Henderson claims that Gem-co is entitled only to a permissive shop right to use the mounter in its business but has no right to manufacture for sale or to sell the same and has no shop right whatsoever in the demounter.

Where an employee, even though not hired to invent, develops an invention in his employer’s shop at the expense of his employer, equity will intervene to protect the employer against later exclusive adverse claims of the employee-inventor by giving the employer a shop right in the invention thereby enabling the employer to make, use and sell the device invented by the employee. *Flannery Bolt Co.*v. *Flannery,*86 F. (2d), 43; *Fuller & Johnson Mfg. Co. v. Bartlett,*68 Wis., 73, 31 N. W., 747, 60 Am. Rep., 838; *Barlow & Seelig Mfg. Co.*v. *Patch,*232 Wis., 220, 286 N. W., 577. See *United States*v. *Dubilier Condenser Corp.,*289 U. S., 178, 77 L. Ed., 1114, 53 S. Ct., 554, 85 A. L. R., 1488; *McClurg*v. *Kingsland,*42 U. S., 202, 11 L. Ed., 102; *Solomons*v. *United States,*137 U. S., 342, 34 L. Ed., 667, 11 S. Ct., 88; *Lane & Bodley Co.*v. *Locke,*150 U. S., 193, 37 L. Ed., 1049, 14 S. Ct., 78; *Gill*v. *United States,*160 U. S., 426, 429, 40 L. Ed., 480, 16 S. Ct., 322; *Pressed Steel Car Co.*v. *Hansen,*137 F., 403, 415, 416.

*101This court will not weigh the evidence and is limited ;in the consideration of this case to the facts upon which the Court of Appeals based its conclusions, unless such conclusions are not supported by substantial ■ evidence. The Court of Appeals in reaching its conclusions was limited to the evidence most favorable to Gemco. As to the mounter, the evidence shows that Henderson developed the mounter while he was employed by Gemco and on its time and at its expense. The evidence further shows that Henderson made' no ■claim of the ownership to the tire mounter until after it had been fully perfected. About January 1946, he indicated for the first time that he expected a commission on the tire mounters sold by Gemco, from which fact the inference may be drawn that he understood ‘that Gemco had in contemplation the sale as well as the use of the tire mounter. From this evidence con■cerning the conduct of the parties, the Court of Appeals could have found as it did find that Gemco had a nonexclusive shop right to use,” manufacture and sell the tire mounter.

On the other hand, the courts hold that an employee, not under contract with his employer to invent, may •protect himself against the establishment or accrual • of a shop right in his employer in any invention or device perfected by such employee on his own time and at his own expense, though during the period of employment, by words, acts or conduct which clearly negate the establishment or accrual of such shop right. *Pressed Steel Car Co.*v. *Hansen, supra; White Heat Products Co.*v. *Thomas,*266 Pa., 551, 109 A., 685.

In the case of *United States*v. *Dubilier Condenser Corp.,*above cited, the court in the course of its opinion said:

> “* * * where a servant, *during his hours of employ-.ment,*working with his master’s materials and ap*102pliances, conceives and perfects an invention for which lie obtains a patent, be must accord bis master a nonexclusive right to practice the invention. * * * This is an application of equitable principles. Since the servant uses his master’s time, facilities and materials to attain a concrete result, the latter is in equity entitled to use that which embodies his own property and to duplicate it as often as he may find occasion to employ similar appliances in his business. But the employer in such a case has no equity to demand a conveyance of the invention, which is the original conception of the employee alone, in which the employer had no part. This remains the property of him who conceived it, together with the right conferred by the patent, to exclude all others than the employer from the accruing benefits. * * *” (Italics supplied.)

It will be noted that the court, in the case just quoted from, in describing the peculiar relationship of the employee-inventor and his employer under such circumstances, did "not use the broad phrase, “term of employment,” so frequently used by the courts and construed by them to comprehend 24 hours a day during the entire employment, but on the contrary and in contrast the court studiously avoided the use of that term and used the more limited term, “during his hours of employment,” to express the period of time for which the employee must account to his employer for his inventive activity. The clear inference must be drawn from the careful statement of the court that the employee may exercise his creative genius on his own account during his nonemployment hours.

In the opinion of this court there is no substantial evidence warranting the finding of the Court of Appeals in giving G-emco a nonexclusive shop right in the demounter to make, use and sell the same. Although the evidence shows that some suggestions were *103made to Henderson to perfect a demounter, *he did all the work on the demounter at his home and not on the time of his employer.*He refused to give Gemco a bill of materials for the construction of a demounter and refused, upon request, to take a model to the Gemco shop. Furthermore, throughout the negotiations with Gemco concerning the use of the demounter, he insisted that he was the owner of the invention and should have a monetary consideration for its use. The only connection Gemco had with the demounter was a showing of the demounter by Henderson to some of the Gemco officials when they were visiting at his home. In the opinion of this court Gemco acquired no shop rights in the demounter.

The decree of the Court of Appeals so far as it applies to the tire mounter is affirmed but its decree so far as it applies to the tire demounter is set aside and this court, in the latter respect, enters the decree which the Court of Appeals should have entered, to the effect that Henderson is the sole owner of the patent or device designated as a tire demounter and that Gemco has no shop right of any kind whatsoever in the same.

The decree of the Court of Appeals is modified and as modified affirmed.

*Decree modified and affirmed.*

Weygandt, C. J., Matthias, Zimmerman and Stewart, JJ., concur.

Taet, J.,

concurs in paragraph one of the syllabus but dissents from paragraph two of the syllabus and that portion of the judgment modifying the decree of the Court of Appeals.

Taet, J.,

dissenting. I regret that I cannot agree with the the conclusion of the majority of this court *104that there was no substantial evidence to sustain that part of the judgment of the Court of Appeals which held that plaintiff was entitled to shop rights in the demounter.

Henderson was employed by plaintiff in November 1945 at $75 per week to adapt his patented hitch for manufacture on products of plaintiff. Until June 1946 ■. Henderson’s duties required very little of his time. On some days he had nothing to do. On others, he-had work which did not fully occupy his time for the day. He was not required to punch a time clock or to account for his time. Frequently, when there was nothing for him to do, he would stay at the plant during the working day and sometimes did not even go down to the plant. This fact was known to plaintiff. Starting in June 1946 Henderson worked for plaintiff at the Grimm Iron Works in connection with his hitch, but it appears that, even then and until his employment by plaintiff- ended, he was allowed to be away when there was no work for him to do and was frequently away for substantial portions of the day.

The tire mounter was exhibited by him to Gemco officials in January 1946, and there was substantial evidence tending to prove that the incorporation of a. demounter with it was then discussed and Henderson was instructed by plaintiff to develop one and was told' that he would be given whatever help he needed. There was evidence tending to prove that he started developing a demounter as early as February 1946, and it is undisputed that development of the demounter was under way not later than April 1946. There was substantial evidence that the demounter development was ■ practically completed before Henderson left plaintiff’s employ in October 1946.

Plaintiff was interested in acquiring exclusive rights ■ to make, use and sell the mounter and was willing-*105to compensate Henderson for such rights, even though it apparently claimed that the mounter invention belonged to it. When Henderson learned in March 1946 ■of plaintiff’s claim that the moimter invention belonged to it, he employed his own patent attorney and a controversy developed between the plaintiff and Henderson as to ownership of the mounter invention. How-ever, at all times during his employment, Henderson ■ apparently conceded plaintiff’s shop rights in that invention. His position was that he owned the invention and the plaintiff had only shop rights.

There was substantial evidence that Henderson •asked a raise in salary because of the rights in the : mounter invention which plaintiff had obtained through Henderson’s employment. Admittedly Henderson’s •salary was raised in April 1946 from $75 to $100 a ■ week.

There was substantial evidence that Henderson ■ asked plaintiff if he could work on the demounter development at home and he was given permission to do so; and that some of the parts for the demounter were at least partially fabricated in plaintiff’s plant. Sometime after April 1946 Henderson was asked by plaintiff if he was working on the demounter and he said that he°was. Plaintiff told Henderson it would pay for parts required in the demounter development.

The rights of the holder of a patent are founded exclusively on statutory provisions, 40 American Jurisprudence, 533, Section 3; *Brown*v. *Duchesne,*60 U. S. (19 How.), 183, 195, 15 L. Ed., 595. All that a patent and patent statutes give to an inventor is a right, for a limited time, to prevent others from making, using or selling the device which he invented. *Ethyl Gasoline Corp.*v. *United States,*309 U. S., 436, 456, 84 L. Ed., 852, 60 S. Ct., 618.

In the early cases recognizing shop rights, the in*106ventor had led his employer to believe that the inventor would not insist on his right as a patentee to prevent the employer from using, making or selling the patented device. Such conduct was regarded as the equivalent of a representation to that effect by the inventor to the employer. See *McClurg*v. *Kingsland,*42 U. S. (1 How.), 202, 11 L. Ed., 102; and *Solomons*v. *United States,*137 U. S., 342, 34 L. Ed., 667, 11 S. Ct., 88.

If the employer, in reasonable reliance upon such representation, incurred a detriment, then there were all the elements of an equitable estoppel. When the inventor sued the employer to enforce the right the inventor’s patent gave to prevent anyone from making, using or selling his invention without his permismission, he found himself estopped to claim that he did not give permission to his employer to make, use or sell the invention. *Gill v. United States,*160 U. S., 426, 40 L. Ed., 480, 16 S. Ct., 322. This equitable defense of the employee resulted in the employer having a right to use, make or sell the invention even though he had no express permission from the inventor. That right was commonly called a ‘£ shop right. ’ ’

In cases where shop rights have been found to exist, the courts have referred to several factors which they regard as justifying the shop right. In some cases there are more factors than in others. An analysis of these factors will disclose that those held sufficient to justify a shop right are such as make the inventor’s enforcement of his right to prevent the employer from making, using or selling the invention something which is tainted with what may be described loosely as “not doing equity.” *United States*v. *Dubilier Condenser Corp.,*289 U. S., 178, 188, 77 L. Ed., 1114, 53 S. Ct., 554, 85 A. L. R., 1488. Cf. *Morton Salt Co.*v. *G. S. Suppiger Co.,*314 U. S., 488, 86 L. Ed., 363, 62 S. Ct., 402.

*107In *Gill*v. *United States, supra,*Mr. Justice Brown, on page 435, said:

> ‘ ‘ The fact that he made use of the time and tools of his employer, put at his service for the purpose, raises either an inference that the work was done for the benefit of such employer, or an implication of bad faith on the patentee’s part in claiming the fruits of labor which technically he had no right to enlist in his service.”

It may even be said that the equitable recognition of shop rights was merely the result of equity refusing to help the employee bite the hand that fed him. Equity refused to help the employee prevent the employer from practicing an invention conceived or developed in part with the material of the employer or during hours for which the employee was accepting pay from the employer.

In the instant case there was substantial evidence to establish that the plaintiff encouraged Henderson to undertake development of the demounter, that it was developed while Henderson was an employee, and that the plaintiff could reasonably believe that Henderson was developing it with a view to manufacture, sale and use by the plaintiff. Although the work on the demounter was apparently done at Henderson’s home, there was substantial evidence to the effect that Henderson sought and obtained permission to carry on the development work at his home instead of at the factory. Furthermore, Henderson was paid a salary and apparently had no-very definite hours of work, so that it might even be reasonably inferred from the evidence that the work on the demounter which he did at home was work for which he was being paid by plaintiff.

From my examination of the record I know that many of the foregoing facts were disputed. However *108the Court of Appeals, and not this court, is the court which weighs the evidence. It is my conclusion that' there was substantial evidence to establish such facts. In the absence of a special finding of facts, which defendants did not request the Court of Appeals to-make, I cannot say that the court did not find those facts when it would have been justified on the evidence in finding them.

We have a situation where the Court of Appeals-could have found, on the evidence, that Henderson accepted financial encouragement in the development of the demounter, which encouragement was given by plaintiff in the reasonable belief that Henderson would’ not enforce against the plaintiff any right which his patent on the demounter would give him to exclude-plaintiff from making, using or selling it. Under those circumstances I believe that the Court of Appeals would even have been justified in holding that Henderson was equitably estopped to prevent plaintiff from using, making or selling the demounter. If so, the Court of Appeals was justified in its holding that plaintiff had a shop right to make, use or sell the demounter.